Paris Air Show: How do you buy an airliner?

At the Paris Air Show, if manufacturers and airlines meet, no transaction is really concluded there. Only contract announcements, or even promises to purchase, are made. Do not believe that the buyer of an airline visits the cabin of the plane on the ground, admires its evolutions in flight, then, between two glasses of champagne, pays a deposit check.

The signatures in front of the media are only publicity effects, the fruit of prior negotiations which often last several months. In the major airlines, an “aircraft fleet” department works full-time on these files with complex technical, commercial and financial aspects.

For aircraft over 120 seats, the choice is essentially between Airbus or Boeing. Smaller aircraft are now offered by Airbus (A220 range, ex-CSeries), and still by the Canadian Bombardier and the Brazilian Embraer (E-Jet range). Russian Sukhoi and its SSJ are only present in Russia or almost. The Franco-Italian ATR dominates the market for propeller-driven turboprops under 70 seats. Finally, the Chinese Comac, father of the C919, is the big absentee from this show.

A company executive must first estimate the number of devices he will need in the next five to ten years, over which time deliveries are spread. Its economic forecasters help it. But the equation is not simple because you have to anticipate the traffic for a period of fifteen to twenty years – which corresponds to the service life of the aircraft ordered today.

Geopolitical crises and the Covid-19 pandemic have closed markets around the Mediterranean. At the same time, an unpredictable abolition of visas can give access to new destinations.

Let’s take an example with ten devices ordered, knowing that nine will actually be operational each day over the scheduled overhauls and unforeseen events. Number of seats, range, consumption, maintenance costs and training of crews and ground technicians are some of the essential criteria when choosing. Another parameter not to be underestimated: what will be the resale value of the aircraft on the second-hand market? Choosing between a more expensive device offering the latest technology that is easy to resell and an inexpensive end-of-life device that will end up being deconstructed is a dilemma.

In addition to increased traffic, aircraft ordering can be guided by modernizing the fleet, knowing that from one generation to the next the fuel and pollution savings can reach 15%. “We are seeing an increase in deliveries, but these are more replacement deliveries, for fleet renewal and for more fuel efficient aircraft,” says Bob Lange, Business Analytics and Market Forecasting Manager at Airbus, during a press briefing before the show.

The aviation market, according to analysts Oliver Wyman, is driven by three trends. First, the leadership of Airbus: over the decade, Airbus should produce a cumulative of around 49% of additional aircraft, compared to around 34% for Boeing. Then, the demand for medium-haul flights, and in particular for the A321, which will lead to the leadership of single-aisle aircraft (60% of the fleet in 2023 compared to 65% in 2033). Finally, aircraft with new engines and an upgrade of the cabin: within the A321s, the A321neo will see its relative share considerably increase in production (33% in 2023 of production compared to 64% in 2033).

The question does not always arise. Airbus does not have a workhorse like the Boeing 777-300ER, which carries nearly 400 passengers and more than 20 tons of cargo, but its successor, the Boeing 777X, is slow to enter production, which leaves the way free to the Airbus A350-1000. For Transavia France, the low-cost subsidiary of the Air France-KLM group, the dilemma arose in 2007 between the Boeing 737 and the Airbus A320, whose performance was comparable.

“The Dutch branch that oversaw the start-up of the French subsidiary had already been equipped with Boeing 737s since 1966. Continuing with this model was logical, even if the Air France fleet is equipped with A320s,” explained Antoine Pussiau, CEO of Transavia to the time. The cards have since been reshuffled and the difficulty of offering the Boeing 737 MAX to passengers after two crashes, in 2018 and 2019, tipped the scales towards the Airbus A320 and A321. One hundred aircraft were ordered at the end of 2021. The Boeing-Airbus transition begins at the end of this year. She had taken eight years for the same operation at EasyJet.

For a company, it is also desirable not to put all its eggs in one basket and to encourage competition… Thus the Air France-KLM group will eventually have medium-haul A220s (ex-Bombardier CSeries ), A320neos and A321neos.

The gross purchase price of the device(s) is not the only issue when negotiating with the manufacturer. Bringing a new aircraft online requires training a generation of pilots (at least six crews per aircraft) and numerous technicians. It must be done at least six months in advance, not counting the time to market the seats. An agreement with the pilots’ unions may also be necessary.

When an airline launches a new aircraft, it does not always own it. Three main modes of financing correspond to most situations. Traditional ownership in a company like Air France or Emirates concerns one third of the fleet. Another solution, leasing or financial leasing makes it possible to pay only rentals, then to buy the plane back from the bank at the end of the contract. Finally, operational leasing, offered by many specialists (Air Lease, ILFC, AerCap, Gecas, etc.) owning around half of the world’s aircraft fleet, offers great flexibility.

Short rental periods (seven years) make it possible to increase or reduce a fleet according to economic conditions. A Boeing 737 rents for just under $500,000 per month and costs $93.3 million to purchase (list price, before negotiations). The company’s financial, accounting and tax situation may encourage it to diversify its sources of financing. Other formulas are possible such as lease back: the company was able to benefit from an attractive price from the aircraft manufacturer, for example, in the case of a global order, resells the aircraft to a lessor the same day of the delivery and assume rent at negotiated rates. In all cases, the manufacturer is paid cash upon delivery of the aircraft.

A full check of the aircraft is carried out before signing the delivery and transferring the tens of millions of dollars of the balance – usually 85% of the amount. As we saw in Seattle at the Boeing Field aerodrome, a Transavia team dissected the plane with a grease pencil and a roll of red tape to mark all the faults, which were then corrected one by one by Boeing technicians.

A first flight took place only with the pilots and the aircraft manufacturer’s test engineer. During the second flight, with a Transavia pilot, all possible and imaginable failures are caused, including the shutdown and restart of an engine as well as approaching stall. The third so-called “ferry” or ferry flight, once the documents have been signed and the bank transfers made, takes off from Seattle to Orly with a technical stopover in Iceland.

The aircraft begins its career by performing four to five legs each day. It will total three thousand five hundred flight hours per year over approximately twenty-five years and carry nearly eight million passengers alone.